88 Energy Limited (ASX:88E) Managing Director, David Wall Discusses the Company’s Project Icewine on the North Slope of Alaska 88 Energy Limited
(ASX:88E) is an oil and gas exploration company focused on the central North Slope of Alaska. We have a project with 272,000 gross acres, at which we recently drilled our first exploration well, Icewine #1 and the project’s name is Project Icewine. So you can see a theme there. The results from that well, which was a core hole into an interval called the HRZ have been very successful, they’ve either met or exceeded our pre-drill expectations. And we’re now looking to drill the next well, which is an appraisal well, to prove the productive potential of the HRZ and that is scheduled to spud in the first quarter of next year.
Project Icewine is located 35 miles south of Prudhoe Bay, which is the largest onshore conventional oil pool in North America, on the prolific North Slope of Alaska. 272,000 gross acres, we have 78 per cent working interest and operatorship, giving us just over 210,000 net acres. We’re chasing primarily an unconventional play called the HRZ shale play. And we also have significant conventional potential on our acreage. We recently drilled our first well Icewine #1, having acquired the project in November 2014. So we were able to acquire the project in November 2014, permit, plan, spud the well within a year of acquisition, which was record time for a new entrant into Alaska.
We delivered the well on budget and achieved 100 per cent of our operational objectives, which was primarily to call the area the interval of interest, being the HRZ. And the results from the analysis of that core, subsequently in the first quarter of this year, have been very successful. And they have proved effectively that we have what is known as a vapour phase, which is where liquids exist in a gaseous form, in the reservoir and hence can flow at higher rates.
The objective of Phase II is to prove the productive potential of the HRZ. So the results from the core have shown us that the HRZ, all things being equal, should be able to produce at very high rates. And now we have to prove that it can, by drilling the next well, which will be a horizontal well with a multistage fractural stimulation.
The recent $25 million capital raising was placed to high net worth’s and institutional investors. And this is really the first round of investment we’ve seen from the institutional investment community in any size. And the funds used from that placement, will go towards paying for an additional 172,000 acres that we bid on successfully in November 2015, to compliment the existing 100,000 acres that we had. To pay for a 2D seismic acquisition that has recently been completed, with the leftover money going towards the cost of drilling the Icewine #2H.
Our current cash position is a little under AUD$30 million, and we estimate that we’ll have between US$10 million and US$12 million in the bank at the end of the year, for the drilling of Icewine #2H.
Technically the first production the company could have is from Icewine #2H; the well is designed to prove the production potential of the HRZ. And we could be producing by this time next year; however, it won’t be in large amounts. And really what we want to do in the medium term, which is about a three-year time horizon, is to do what’s called creaming the curve, which is creating as much value as possible, in as short a time period as possible. Which means that we will look to increase the value of the acreage to a point in time, when it makes sense to monetise it. And obviously the oil price will play a role in the timing of that decision.
So by the end of the year, we hope to be fully permitted and funded for the drilling of Icewine #2H. And there is a small funding gap, but it’s very small, only a few million dollars. And we hope to have that field either by strategic investment, or a farm-out and be ready to go for drilling in the first quarter of next year.
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